The current Act on Personal Income Tax (hereinafter referred to as the “PIT Act”) from 1 January 2019 no longer includes the favorable provisions for the taxation of “school start benefit”. Therefore, such benefits must be taxed according to other provisions of the PIT Act. These benefits can be taxed as certain specified benefits or, depending on the employment relationship, as wages.

Certain Specified Benefits

School start-related benefits can be favorably taxed as certain specified benefits if the conditions defined in the PIT Act are met.

1. Small Value Gifts

From 1 January 2024, employers can provide small value gifts up to three times a year per person, instead of just once, with a value not exceeding 10% of the minimum wage (26,680 HUF) in the form of products, services, or vouchers. The advantage is that this can be given not only to the parent (employee) but also directly to the employee’s child.

The tax obligation for the benefit falls on the employer, not the individual. The tax base is 1.18 times the value of the benefit, with 15% personal income tax and 13% social contribution tax payable.

The provider must keep records of small value gifts, ensuring compliance with data protection regulations, so that the recipients and the value of the benefits can be identified later. If the employer provides school start benefit in the form of vouchers as small value gifts, the vouchers must meet the conditions specified in the PIT Act.

Important Rules for Vouchers

According to the PIT Act, a voucher qualifies as a certain specified benefit if it is clear which product, service, or category of products or services it can be used for, and if the voucher is non-refundable (except for vouchers not given to individuals).

The tax authority consistently holds its professional view, that vouchers usable without restrictions or cash equivalents cannot be taxed as certain specified benefits. For example, vouchers for books, clothing, or food meet the legal requirements, but a voucher issued by a hypermarket that can be used for any product in the store does not.

Similarly, vouchers issued by shopping centers that can be redeemed in any store with different product ranges or vouchers usable for all products in a supermarket do not meet the legal requirements mentioned above.

If an employer provides vouchers to employees that do not specify the product, service, or category of products or services they can be used for, the benefit becomes taxable according to the existing employment relationship, meaning employees will be taxed on the income derived from their employment.

2. Gifts at Events

Employers can provide gifts exceeding 10% of the minimum wage related to school start if they are given at free or discounted events primarily focused on hospitality or leisure, organized for multiple individuals simultaneously. In this case, gifts with a value not exceeding 25% of the minimum wage per person can be given as certain specified benefits.

For example, if an employer organizes a family day for employees and their families, they can provide gift packages containing school supplies worth up to 66,700 HUF per participant, in addition to the tax burden detailed for small value gifts.

According to the tax authority’s interpretation, gifts given at events cannot be vouchers.

Taxation as Income from Employment

School start support can be provided by the employer in cash, vouchers, or in-kind, either to the employee or directly to the student, without any value limit. The employer decides whether to determine the amount of the benefit on a gross or net basis.

As a general rule, these benefits are subject to tax, and the tax burden is determined based on the employment relationship.

School start benefit given in cash to employees is taxed as wages. In the absence of an employment relationship, taxes must be calculated, declared, and paid according to the rules for other income.

If a voucher that does not meet the conditions of the PIT Act is given, which can be redeemed for anything in a hypermarket, it will be taxable according to the employment relationship. Similarly, if the value of the product exceeds the limit set for certain specified benefits, it will also be taxed according to the employment relationship.